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Federal Tax Incentive Combating Runaway Production Is No More, Possibly Beneficial To California?

Stemming runaway production just got a lot harder with the end of the only federal tax incentive that made shooting overseas a less attractive option for filmmakers.

As a recent article from Deadline explains, the now defunct Internal Revenue Code Section 181 of the 2004 American Jobs Creation Act “was designed to stem the flow of runaway production to foreign countries that were, and still are, offering generous tax breaks to lure away American productions”.

Though effective, Section 181’s main issue was the required renewal from Congress every two years. Despite a House bill to do just that once again, it failed to pass for the first time in roughly seven years. While it could be renewed again in the future, as Deadline points out “under a Donald Trump presidency, there might be little political will to do so.”

The Director’s Guild of America spearheaded the creation of Section 181 in 2004, continuing to fight for its renewal each time. The guild explained their reaction in a statement to Deadline:

“In the face of film and television production leaving the U.S., the DGA led the fight for the creation of Section 181 as part of the Jobs Act of 2004, and has continued the fight for its improvement and extension five times since then. We are disappointed in the failure of the current Congress to extend the larger tax package of which 181 is a part. We will continue our efforts to push for legislation that keeps the U.S. competitive in film and television production.”

Even with Section 181 in effect, there has been a major fight against runaway production going on for years, particularly in California. California has taken several steps in attempts to lure back production from the other, monetarily enticing states in the US where filmmaking has migrated to for tax breaks and incentives. If California could find the money to do it, the unfortunate death of Section 181 could prove to be highly beneficial to their filmmaking community, revitalising Hollywood and providing filmmakers access once again to accomplishing their dreams.

While many are hopeful that the Section will be renewed in the future, for the time being it is up to those of us in the filmmaking community to do our part to ensure cohesion and unity in our industry, and not allow things such as this to pass quietly, but fight loud and proud to keep our jobs and our way of life thriving.

Quiet Death For Federal Tax Incentive Designed To Stem Runaway Production

UPDATE with DGA reaction: The only federal tax incentive designed specifically to keep film and TV production in the United States is dead.

The program had been giving significant tax breaks to investors in shows shot in the U.S. for more than a decade, but it will end on the first day of 2017. For Hollywood, it’s the first casualty of the new political reality.

Enacted as part of the American Jobs Creation Act of 2004, Section 181 of the Internal Revenue Code was designed to stem the flow of runaway production to foreign countries that were, and still are, offering generous tax breaks to lure away American productions.

The MPAA has called Section 181 “an important provision that promotes domestic film production,” but it was not a permanent fix; it had to be renewed by Congress every two years. And this year, the lawmakers let it die. A House bill was introduced to extend it, but it died in the Ways and Means Committee. The incentive still could be renewed retroactively next year or the year after, as it was in 2010, but under a Donald Trump presidency, there might be little political will to do so.

“It was one of the greatest jobs acts we had,” lamented attorney Hal “Corky” Kessler of the Chicago law firm of Deutsch, Levy & Engel, one of the industry’s leading experts on the federal tax break. He’s still hopeful, however, that Congress will see the merits of reinstating it. “At some point it will come back,” he predicted. “I don’t know if it will be next year or the year after, but by the end of this year, it’s going to die.